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AB-905 Real property: environmental fee covenants.(2013-2014)



Current Version: 04/30/13 - Amended Assembly

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AB905:v97#DOCUMENT

Amended  IN  Assembly  April 30, 2013
Amended  IN  Assembly  March 21, 2013

CALIFORNIA LEGISLATURE— 2013–2014 REGULAR SESSION

Assembly Bill
No. 905

Introduced by Assembly Member Ting

February 22, 2013

An act to add Section 1471.5 to the Civil Code, relating to real property.


LEGISLATIVE COUNSEL'S DIGEST


AB 905, as amended, Ting. Real property: environmental fee covenants.
Existing law provides for the recording of an instrument containing an Environmental Restriction covenant made by an owner of land or by the grantee of land to do or refrain from doing an act that is reasonably necessary to protect present or future human health or safety or the environment as a result of the presence on the land of hazardous materials.
This bill would also provide for the recording of an Environmental Fee Covenant, as specified, that is, among other things, imposed for no more than 50 years in connection with the installation on the property of equipment or improvements that are intended to promote, among other things, energy efficiency and the reduction of the consumption of water or other natural resources. The bill would require the instrument containing the covenant to include specified information including a legal description of the property subject to the covenant, the dates for commencement and expiration of the covenant, and a specified notice relating to the terms and conditions of the covenant. The bill would require the covenant to be subject to and subordinate to the lien and encumbrance of any first mortgage or any other mortgage against the property subject to certain requirements. The bill would require the covenantee, within a specified period following receipt of written notice from the covenantor, to provide the covenantor with written confirmation of specified matters relating to information about any outstanding obligation under the terms of the covenant. The bill would make findings and declarations in this regard.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 The Legislature finds and declares all of the following:
(a) A significant percentage of California’s existing commercial building stock was built before the 1978 building standards. The installation of energy and water efficiency upgrades that are consistent with the latest building standards would benefit the owners and tenants of these buildings through increased property values and reduced operating costs, while also improving the level of comfort for tenants.
(b) Upgrading the existing commercial building stock with the installation of energy and water efficiency improvements would also benefit the environment through the reduction of energy consumption, water consumption, and greenhouse gas emissions.
(c) Although publicly funded programs exist to defray the cost of installing energy and water efficiency upgrades, commercial sector installation of these upgrades is constrained by the lack of access to affordable private financing opportunities for many commercial building owners.
(d) It is the intent of the Legislature to advance the achievement of the state’s environmental and economic goals by facilitating private funding opportunities for commercial building owners to install energy efficiency, water conservation, and clean energy improvements on their properties through the use of voluntary real property covenants with transfer fees that run with the land. This funding mechanism will provide the opportunity to distribute the costs of the improvements to a commercial building over a period of years and across subsequent owners.

SECTION 1.SEC. 2.

 Section 1471.5 is added to the Civil Code, to read:

1471.5.
 (a) Notwithstanding Section 1468 or any other law, a covenant made by an owner of land or by the grantee of land to do or refrain from doing some act on his or her own land, which doing or refraining is expressed to be for the benefit of the covenantee, regardless of whether or not it is for the benefit of land owned by the covenantee, shall run with the land owned by or granted to the covenantor if all the following requirements are met:
(1) The land of the covenantor that is to be affected by the covenant is particularly described in the instrument containing the covenant.
(2) The successive owners of the land are expressed to be bound thereby for the benefit of the covenantee in the instrument containing the covenant.
(3) The covenant is an Environmental Fee Covenant pursuant to subdivision (e) (d).
(4) The instrument containing the covenant is recorded in the office of the recorder of each county in which the land or some portion thereof is situated.
(b) Except as provided by Section 1466 and subject to paragraph (3) of subdivision (d) or as specifically provided in the instrument creating a covenant made pursuant to this section, the covenant shall be binding upon each successive owner, during his or her ownership, of any portion of the land affected thereby and upon each person having any interest therein derived through any owner thereof.
(c) If several persons are subject to the burden of a covenant recorded pursuant to this section, it shall be apportioned among them pursuant to Section 1467, except if only a portion of the land is so affected thereby, the apportionment shall be only among the several owners of that portion.

(d)This section shall apply to the mortgagee, trustee, or beneficiary of a mortgage or deed of trust upon the land or any part thereof while, but only while, he or she, in that capacity, is in possession thereof.

(e)

(d) For purposes of this section, “Environmental Fee Covenant” is a covenant that meets all of the following requirements:
(1) The covenant imposes a transfer fee meeting the requirements set forth in Section 1098. The amount of the transfer fee imposed through the covenant, combined with the amount of the fee imposed through any prior Environmental Fee Covenant imposed on the same property, shall not exceed 2 percent of the full cash value, as defined in Section 110 of the Revenue and Taxation Code, of the property upon transfer. For purposes of this section, a “transfer” shall mean the conveyance of either an entire or partial undivided fee ownership interest in the subject property, and shall exclude any transfer which is excluded by Section 62 of the Revenue and Taxation Code from classification as a “change in ownership”.
(2) The covenant encumbers property that, at the time the covenant is entered recorded, either does not contain residential units or contains five or more residential units, provided that, with respect to property that contains five or more residential units, the covenant is not prohibited under any rules or regulations adopted by the Federal Housing Finance Agency.
(3) The covenant shall not exceed 50 years in duration.

(3)

(4) The covenant is imposed in connection with the installation or construction on the property of the convenantor of equipment or improvements that are intended to promote any of the following:
(A) Energy efficiency.
(B) The reduction of the generation of greenhouse gasses.
(C) The reduction of the consumption of water or other natural resources.
(D) Compliance with Part 6 and Part 11 of Title 24 of the California Code of Regulations.
(E) The generation of renewable energy using one or more means identified in paragraph (1) of subdivision (a) of Section 25741 of the Public Resources Code.

(4)

(5) The covenant includes in its title the words: “Environmental Fee Covenant.”

(5)

(6) The covenant recites that it meets the requirements of this subdivision. It shall be rebuttably presumed, which presumption shall be rebuttable, that the covenant meets the requirements of this subdivision. The presumption may be overcome if it is established by a preponderance of the evidence that the covenant fails to meet the requirements of this subdivision.
(e) The instrument containing the covenant shall:
(1) Specify the name of the covenantor and covenantee.
(2) Specify the address for the covenantor and covenantee.
(3) Contain the legal description of the property subject to the covenant.
(4) Describe the dates for commencement and expiration of the covenant.
(5) Contain an actual dollar-cost example of the fee for property priced at one million dollars ($1,000,000) or more.
(6) Specify the subordination of the covenant pursuant to subdivision (f).
(7) Specify the terms and buy-out amount for earlier satisfaction of the covenant.
(8) Include the following language in at least 14-point boldface type:
“BY ENTERING INTO THIS INSTRUMENT, COVENANTOR ACKNOWLEDGES AND AGREES THAT (1) THE COVENANT CREATED PURSUANT TO THIS INSTRUMENT WILL REMAIN AN OBLIGATION AGAINST THE PROPERTY UNTIL EXPIRATION OF THE STATED TERM UNLESS THIS COVENANT IS EARLIER TERMINATED IN STRICT ACCORDANCE WITH THE TERMS DESCRIBED IN THIS INSTRUMENT, (2) COVENANTOR’S OBLIGATIONS WITH RESPECT TO THE COVENANT MAY BE SATISFIED ONLY FROM PAYMENT OF THE TRANSFER FEE IN ACCORDANCE WITH THE TERMS DESCRIBED HEREIN, AND (3) THAT THE OBLIGATION TO PAY A TRANSFER FEE IN ACCORDANCE WITH THE TERMS OF THIS INSTRUMENT SHALL REMAIN IN EFFECT AND SHALL CONTINUE TO APPLY TO ANY FUTURE TRANSFER OF THE PROPERTY IRRESPECTIVE OF THE AMOUNT OF THE TRANSFER FEE PAID IN CONNECTION WITH ANY PARTICULAR TRANSFER.”
(f) (1) The covenant shall be subject to and subordinate to the lien and encumbrance of any first mortgage or any other mortgage against the property that secures the payment of any present or future financing used to either purchase the property or finance the construction of improvements to the property or any financing that replaces that acquisition or construction financing, provided that any such financing is bona fide and at arm’s length, and further provided that after any action to enforce a mortgage, including, without limitation, any foreclosure or a transfer in lieu of foreclosure, the property shall remain subject to the covenant and the covenant shall continue to be valid, binding, and enforceable in accordance with its terms.
(2) For purposes of this section, a “mortgage” shall mean any mortgage or deed of trust recorded against the property in the official records of the county in which the property is located.
(3) A “first mortgage” shall mean any mortgage that has lien priority over all other mortgages.
(4) In no event shall a transfer fee be payable upon a foreclosure sale or a transfer in lieu of foreclosure.
(g) In those situations where the covenantor desires and requests, in writing, confirmation of information about any outstanding obligation under the terms of the covenant, including, but not limited to, the remaining term of the covenant and the cost to extinguish the covenant, the covenantee named in the instrument containing the covenant shall, within 14 days following receipt of written notice from the covenantor, provide the covenantor with written confirmation of the matters described in paragraphs (1), (2), (4), (6), and (7) of subdivision (e).